Apr 21, 2018

As you can see in the
chart, the monthly chart is not looking very good, the price to earnings ratio
is also high around 25 for a public sector company which is not guzzling cash
or in more or less infrastructure related businesses. Now election coming up
next, such PSUs with macro businesses are going to get discounted little by
little.

There is support
around 145 levels, from which it might bounce back. But we believe ultimately
it may go and test the major moving averages which are way down from current
levels. And any correction in broader markets or sideways consolidating markets
with dampened investor mood can also make it slide slowly to those levels.

Apr 16, 2018

The tyre stocks had been in an upswing before
the recent Trump Tariff Tantrum correction set off in markets. However after
about couple of months in that, it looks like we are all set to see new buying
and upmoves in selected sectors again. One of them seems to be tyre stocks.

They have got the push to get out of the
correction or consolidation by the falling rubber prices, the decision of
Indian government to levy import duty on rubber and the huge brand value and
investor favouritism created in tyre company such as MRF.

CEAT has been lagging in picking up with its
other peers like Apollo Tyre and MRF which are almost now making new highs.
CEAT, which also once played on the tunes of the sectoral theme with its peers
has been slow in responding the rise in the peer group stocks and still down
about 20% from its highs. One of the reason may be the not so exciting results
in the previous quarter.

However, it looks like it is consolidating and
likely to give good spurt on the upside with first target of 1700 and then
reach its old highs of 2000.

We do not look tyre stocks as commodity
business such as sugar, and all metals. Why? Because they have not behaved in
that fashion. They have more behaved like a consumer and brand businesses. So,
the point is for the medium and long term investors also this stocks are not a
threat. History has good evidence of our argument.

A delivery trader can buy in spot, or try to
trade with call options for april, or may or keep an eye to take a good entry
price and gain on an almost sureshot move on the upside.

Indian
exports up to $5.6 billion could be hit as the US pressures India for greater
market access by declaring a review of the generalized system of preferences
(GSP) through which Indian exporters get preferential market access to the US.

The
GSP programme allows duty-free entry of 3,500 products from India, which
benefits exporters of textiles, engineering, gems and jewellery and chemical
products. The total US imports under GSP in 2017 was $21.2 billion, of which
India was the biggest beneficiary with $5.6 billion, followed by Thailand ($4.2
billion) and Brazil ($2.5 billion).

The
Trump administration has been accusing India of unfair trade practices and has
challenged most of its export subsidies at the World Trade Organization (WTO).
It has also not granted India an exemption on unilateral hike in steel and
aluminium tariffs, unlike to its other strategic allies. On Friday, the US
treasury department added India to the currency practices watch list saying New
Delhi increased its purchase of foreign exchange by $56 billion in 2017 which
does not appear necessary given its already robust foreign exchange reserves.

The
US Trade Representative (USTR) on Friday announced that it is reviewing the GSP
eligibility of India, along with Indonesia and Kazakhstan, based on concerns
about the countries’ compliance with the programme.

For
India, the GSP country eligibility review is based on concerns by the US dairy
industry and medical device industry alleging Indian trade barriers affecting
US exports in those sectors. India has very high import duties on dairy
products to protect its domestic industry. It has also recently put price
controls on medical devices like cardiovascular stents, drawing ire from big US
pharma companies.

“India
has implemented a wide array of trade barriers that create serious negative
effects on US commerce. The acceptance of these petitions and the GSP
self-initiated review will result in one overall review of India’s compliance
with the GSP market access criterion,” USTR said.

A
commerce ministry official speaking under condition of anonymity said though
India is worried about the move, it hopes a majority of US industries which get
cheaper intermediate products from India due to GSP benefits will support
continuation of the programme. “We hope it won’t be easy to withdraw GSP
benefits to India,” he added.

Abhijit
Das, head of the Centre for WTO Studies at the Indian Institute of Foreign
Trade, said given Trump’s tendency to take unilateral action, there could be
threat to India’s continuous access to GSP. Das said India should be ready to
drag the US to dispute settlement if US stops extending GSP to India on the
grounds that India is creating market access barriers to the US.

Though
GSP is a voluntary measure by the US and other developed countries, they need
to be guided by firm WTO principles, Das said. In 2003, India won a case
against the European Commission as the latter denied India GSP on textiles and
drugs, making such preferences conditional to countries combating drug
production and trafficking or protection of labour rights and environment.

However,
Ajay Sahai, director general and CEO of the Federation of Indian Export
Organizations, said India should not be too jittery about the announcement of a
GSP review. “It seems to be a posturing from the US, signalling India that it
should not join China in its disputes against the US on steel and aluminium as
it wants to bargain hard with China.”

“I
don’t think the US is reviewing its GSP policy. If on objective and transparent
criteria, India graduates on some products, that is still fine. In every GSP
review, we lose out on some products, as India becomes competitive and gains
greater market share,” he added.

Apr 11, 2018

India's economic growth will rise
to 7.3 per cent this fiscal and further to 7.6 per cent in the next financial
year, retaining the fastest-growing Asian economy tag, on back of GST and
banking reforms.

In its Asian Development Outlook
(ADO), 2018, Manila-based ADB said, "risks to trade are high" and
retaliatory actions could dent growth in the Asian region going forward.

Indian economy grew 6.6 per cent in the last fiscal as it battled the lingering effects of demonetisation in 2016, businesses
adjusting to goods and services tax (GST) in 2017, and a subdued
agriculture. The country's economic
growth was 7.1 per cent in 2016-17.

With 7.3 per cent growth projected
for this fiscal, India would be reversing the two-year declining trend.

Robust foreign direct investment
flows attracted by liberalised regulations and the government steps to improve
the ease of doing business will further bolster growth, Sawada said.

The ADO said protectionist trade
measures by the United States are yet to impact trade flows to and from
Asia. "However, further action and retaliation
against it (US trade tariffs) could undermine the business and consumer
optimism that underlies the regional outlook (for Asia)," it said.

With regard to China, it said the country will slow
down from 6.9 per cent in 2017 to 6.6 per cent this year, and 6.4 per cent in
2019.

"India would remain the fastest-growing
country across Asia," ADB India Country Director Kenichi Yokoyama said.
However, there are issues regarding rising NPAs and risks from crude oil prices
rising above USD 70 a barrel, he said.

He, further, said the impact of
the US tariff hikes may not be much, but India "need to be
cautious". "The biggest risk factor could be the crude
oil price," Yokoyama said.

ADB's growth projection of 7.3 per
cent this fiscal is in line with that of rating
agency Fitch, but a tad lower than RBI's forecast of 7.4 per cent.

The ADO projected developing Asia to grow 6
per cent in 2018 and 5.9 per cent in 2019.

It, however, said the risks for Asian region are
mostly on the downside.

"The big risk, of course,
would be worsening trade friction. Another would be rapid capital outflows that
could materialise if the US Federal Reserve needed to raise interest rates
faster than markets expect.

"Finally, the continued build
up of private debt for some regional economies since the global financial
crisis could undercut growth. Developing Asia is well positioned to respond to
these shocks," it added.

India's growth is expected to pick
up further to 7.6 per cent in 2019-20 as efforts to strengthen the banking
system and continued corporate deleveraging are likely to bolster private
investment, the ADO said.

ADB projects global crude oil
prices to remain around USD 65 a barrel in 2018 and USD 62 a barrel in
2019.

Also, set to catalyse growth, are benefits from
the GST as it mitigates geographic
fragmentation and adds revenue to the exchequer, as well as further progress on
fiscal consolidation and reform to promote FDI, the ADO said.

It said the prospects for policy stimulus remain limited and there is
risk of tight interest rate regime.

"The deferment of fiscal consolidation,
upside risks to inflation, and expected hikes in US interest rates in 2018
squeeze maneuvering room for policy rate cuts to stimulate growth. At the same
time, the odds of a rate hike are low with the central bank indicating
tolerance for slightly higher inflation and recognition of the need to nurture
recovery. Consequently, the status quo is likely to hold in FY2018, albeit with
some risk of monetary tightening," the ADO said.

It projected inflation to average
4.6 per cent in FY2018 (2018-19), rising to 5.0 per cent in FY2019 with
further firming of global commodity prices and strengthening of domestic
demand.